When economic growth stops reaching households

The most dangerous economic number may be a positive one. An economy can expand while living standards per person stall or fall.

Companies post record profits, exports surge and politicians celebrate growth, yet the gains can disappear once divided across the population. Growth has not vanished; it has stopped reaching households.

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This is an increasingly global problem.

Some 3.3 billion people (more than two in five) live in economies where GDP per person grew by half as much or less between 2014 and 2024 than in the preceding decade. More than 730 million live where it declined outright.

The slowdown now includes China, Germany, Brazil and Russia, while the number of low- or no-growth countries and territories has risen from 68 to 80.

SA’s growth problem

South Africa is not watching from the sidelines.

Calculations based on World Bank data show that real GDP per person fell 7.1% between 2014 and 2024, after rising 18.7% in the preceding decade.

Read: SA secures R24.76bn World Bank loan to boost infrastructure

By 2024, real output per South African was below its 2007 level. By this measure, 17 years have yielded no lasting improvement.

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GDP per person is imperfect. It hides inequality and says little about who captures the gains.

But it tests the promise on which work, saving and democratic patience depend: tomorrow should be better.

In China, people believing that hard work is always rewarded fell from 62% in 2014 to 28% in 2023. When effort loses its link to reward, people disengage, leave or vote for change.

AI’s uneven gains

The boom in artificial intelligence (AI) is a current example of growth travelling beyond the firms generating it. Taiwan and South Korea occupy the centre of the same supply chain, yet their windfalls are spreading differently.

Taiwan’s surge is building capacity. Real fixed investment has risen nearly 40% since late 2023, electronics employment has expanded and wage gains have spread beyond the industry.

South Korea’s initial boost has been more price-driven. Fixed investment has risen just 3% in roughly three years, fewer than 1% of workers make chips, and rising share prices have done little for consumption.

One boom is widening the productive base; the other has so far enriched a narrower slice.

SA is running its own version of this same scenario.

Microsoft has committed R5.4 billion to local cloud and AI infrastructure and will fund technical certification examinations for 50 000 people. These are valuable inputs, not proof of higher productivity or pay.

The test is whether data centres will help local firms to adopt new tools, training leads to work, and South African suppliers to enter the chain.

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Prosperity needs a transmission mechanism. Profits must finance productive investment; investment must raise demand for workers and skills; and productivity must reach wages.

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If the chain ends with profits, share prices or imported equipment, GDP can rise while households wait.

The debt burden

Debt is weakening this mechanism. Gross public debt in advanced economies is near 110% of GDP, while the median 10-year government bond yield exceeds 4% (roughly five times its 2015 to 2021 average).

As cheap debt is refinanced, interest crowds out infrastructure, education and social protection.

AI infrastructure is also competing with governments for savings, raising the price of capital. South Africa already lives inside this arithmetic.

National Treasury projects gross national government debt to peak at 78.9% of GDP in 2025/2026. Debt service of R420.6 billion absorbs 21.3% of main-budget revenue.

In 2026/2027, the projected R432.4 billion interest bill will exceed spending on either health or basic education. The debt ratio may begin to fall, but the debt stock will keep rising.

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This leaves a harder question than whether SA can attract the next mine, renewable-energy project or data centre – will these deepen local supply chains, lift output per person and expand the tax base before interest consumes the proceeds?

The next positive GDP print may earn applause. The number that matters is whether it gives ordinary South Africans better choices. Growth that never reaches households is an accounting success and a political failure.

Dr Francois Stofberg is a financial well-being economist at the Efficient Group.

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